Make use of fluctuating prices to build a hedge fund. I make monthly budget for my family and then try to run my house within that budget limits. Two things that ruin my budget most of the times are: Unplanned emergencies (well can emergencies be planned? ;)) and non-fixed costs. Emergency fund can take care of former, but what about latter?
There are so many not-fixed expenses in a month. Electricity bill, fuel costs, medicines, grocery and so on. How I deal with them? I open up my last years excel sheet, take an average spending of every category, adjust it for 10% up (to account for inflation). This new amount is now my monthly limit for that particular category. It gets that amount per month and whatever is saved gets carried forward in next months.
For example, if my gifts annual spending of last year is say Rs. 24,000. Monthly average comes out to Rs. 2,000 and 10% adjusted is Rs 2,200. I know that particular month, assume October, is going to be cash intensive because I have maximum occasions and festivals in there. In every month starting gifts category will get Rs. 2,200. Whatever amount is left gets carried forward in another month and so on. By the time October comes I have already saved Rs. 10,000 in it and hence I will be able to handle festival season without much of budget skewing. In fact, what I also do it put that money aside in one money multiplier account so that in the mean time it can also fetch some high interest.
How about you? Do you budget on actual or on averages?
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I just loved this piece and have short listed this point for implementation in my budget from this month onwards.
ReplyDeleteSo, firstly I plan to start with yearly fixed but big expenses divided into monthly installments.
Like say Car and personal insurance and travel to my hometown. So, if the annual expense is say around 36k per annum in these heads i'll keep 3k per month on that head in my Home Loan OD account. When the time for those event comes i'll withdraw the fund from the OD account and use it for the purpose. In the meanwhile this money will also earn/save me 9.5 interest rate which am paying on my HL and fasten up my principal re-payment :)